Economic costs

economic costs - are certain costs that are related to resource mobilization.The latter is necessary for creation of services and benefits.There are two main provisions describing the nature of the costs.In the first place every resource is limited in application.Secondly, each type, which is used in manufacturing, has at least two alternative applications.

In terms of the existing diversity of needs that must be met, create a lack of resources.This is actually a problem of choice.The economic costs caused by the refusal of the manufacture of alternative products.All costs associated with financing, taken as alternative (imputed).In other words, the cost of each resource that is involved in the production process, is formed in accordance with its value at the best of all available options for the application of this factor of production.In connection with the alternative (economic) costs are costs arising from the use of economic resources in the production of certain goods.Thus, they are evaluated in view of their lost opportunity (resource) of use, but for other purposes.

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business sense economic costs are those payments that are made by the supplier to divert productive resources from those used in the production of an alternative.These payments may be internal or external.Thus, we can consider the monetary (external, explicit) and implicit (internal, implicit) costs.External expenses include payments to suppliers for resources that are not co-owners of the company.These expenses include, for example, wages, fee for materials, raw materials, energy, components, which are provided by third-party vendors, and others.

organization may use the resources that belong to her.In this case, we consider internal costs.These costs are directed to their own and use their own resources.Internal costs are equal to the cash payments that the entrepreneur could get in the best mode of application (possible alternative).In this case deals with some income from which refuses a leader in the process of creating their own business.Such income can be attributed, for example, the salary he would receive if employed, or interest income in lending, if invested in it, and not in the company's development.

inseparable component of the internal costs the entrepreneur is a nominal profit.This is the minimum amount of the income that exists in the industry at this time, and which is capable of holding a businessman within the business.

economic and accounting costs

should be noted that, in practice, only the external costs are taken into account.They have the name of the accounting costs.Due to the fact that the accounting does not use internal costs, financial gain will be the difference between the gross income (revenue) and the external costs.This economic profit would be the difference between gross income and economic costs.The magnitude of the financial income is always greater than the value of internal costs.Thus, even with the profit according to the documents, the company may not have the economic income.In certain situations, an organization may even incur losses.This situation occurs when the gross income does not cover all the costs - economic costs.